Host Hotels issues investment-grade notes in Q1, eyes acquisitions

By Lisa Kerner

Charlotte, N.C., May 3 - Host Hotels & Resorts, Inc. president and chief executive officer Ed Walter called his company's first-quarter results "outstanding."

Results were driven by a 5.1% increase in comparable hotel revenue per available room and strong performances at the luxury resort and conference center properties.

Host Hotels expects to continue acquisition and disposition activity, said Walter during the company's earnings call on Friday.

During the quarter, Host Hotels spent $15 million on properties acquired in 2012 and 2011 and expects to invest between $40 million and $50 million for 2013.

In early April, the company sold four acres of excess land adjacent to its Newport Beach Marriott Resort and Spa to a luxury home builder for $24 million for a recognized a gain of about $21 million.

"We intend to be a net acquirer in 2013 and have active pipelines in both sales and acquisitions and anticipate acquisition activity in the range of $135 million to $150 million in the second quarter," said Walter.

Debt, stock issuance

Also during the quarter, Host Hotels issued its first investment-grade senior notes in a $400 million offering of 10-year bonds at an interest rate of 3.75%, "which is 100 basis points cheaper than any non-convertible bond coupon in our history," said chief financial officer Larry Harvey on the call.

Proceeds plus available cash will be used to redeem on May 15 the $400 million of 9% series T senior notes due 2017 at 104.5, reflecting an $18 million call premium.

"The interest savings are substantial at $21 million per year," Harvey said.

Subsequent to quarter-end, Harvey said the company repaid its "only meaningful debt maturity in 2013," the 4.75%, $246 million mortgage loan on the Orlando World Center Marriott with available cash.

In addition, the company called $200 million of its 6.75% series Q senior notes due 2016 at 101.125, which reflects a $2 million call premium. The redemption will be funded through a $150 million draw on the revolver portion of its credit facility and with available cash.

Following the redemption, Harvey said Host Hotels will have about $380 million of cash and cash equivalents, $692 million of available capacity under its credit facility and roughly $4.8 billion of debt.

The company ended the quarter with leverage of 3.9 times net debt to EBITDA, according to the CFO.

Host Hotels issued 6.1 million shares of its common stock during the first quarter at an average price of $16.78 per share for net proceeds of about $102 million.

On April 15, the company paid a regular quarterly cash dividend of $0.10 per share on its common stock to stockholders of record as of March 28.

Looking ahead to the full year, Host Hotels is expecting earnings per diluted share in the range of $0.31 to $0.39 and adjusted EBITDA of about $1.28 billion to $1.34 billion.

Host Hotels & Resorts is a lodging real estate investment trust based in Bethesda, Md.

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